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tester [92]
2 years ago
12

Suppose an unlevered firm issues $1000 in debt at a cost of debt of 10%. If the corporate tax rate is 20%, what is the change in

the firm's value?
Business
1 answer:
Strike441 [17]2 years ago
3 0

Suppose an unlevered firm issues $1000 in debt at a cost of debt of 10%. If the corporate tax rate is 20%, $200 t is the change in the firm's value.

Due to the issue of the corporate tax rate is entitled to Interest Tax Shield assuming Debt issued by the firm is perpetual and ignoring financial distress costs

Change in Value of firm

=Net Effect of Debt Financing

=Present Value of Interest Tax Shield (financial distress costs ignored)

= DebtValue * Cost of Debt * Tax Rate Interest Rate

= $1,000 * 10% * 20% 10%

=$200,

corporate tax rate, also known as corporate income tax or corporate tax, is a direct tax levied on the income or capital of a corporation or similar corporation. Many countries impose such taxes at the national level, and similar taxes may be levied at the state or local level.

Learn more about tax rate here: brainly.com/question/25791968

#SPJ4

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In a period of rising prices, the inventory method which tends to give the highest reported net income is:
Blizzard [7]

Answer:

b. first-in, first-out.

Explanation:

Generally, there are three methods for estimating the inventory shown below:

1. First-in-first, the company is selling the old products in this way than the new ones, which means first selling the old products and then selling the new ones

2. Weighted average method: Weighted cost is measured by considering the total revenue and total purchase

3. Last-in-first-out: Contrary to the first-in-first-out process, the first sale of new goods, then selling of old goods.

4. Base stock: The process by which the orders of the consumer are fulfilled by holding the less inventory

In the FIFO method, the highest ended inventory results in the lower cost of goods sold at the highest net profits.

7 0
3 years ago
A decrease in the supply of a good can be expected to cause ____ in the equilibrium price of the good and ____ in the equilibriu
JulsSmile [24]

Answer:

Increase, Decrease

Explanation:

A decrease in the supply results in many buyers competing for very few goods. If the demand is constant, the quantity supplied and price have an indirect relationship. A decrease in the volume of supplied results in an increase in price. Many buyers will be competing for a few products causing the equilibrium price to increase.

A decrease in supply will cause the quantity available for buyers to buy to decline. Consequently, the volume purchased will be fewer.  Equilibrium quantity will, therefore, decrease.

4 0
3 years ago
If 5 Swiss francs trade for $1, the U.S. price level equals $1 per good, and the Swiss price level equals 2 francs per good, the
nordsb [41]

Answer:

0.4 swiss good(s) per U.S good(s)

Explanation:

firstly we calculate how many dollars we get per Frank so we will say $1/ 5 Swiss Franks =$0.2 which is similar to (5x =1, solve for x =1/5 / 0.2 in simple maths )per Swiss Franc thereafter we calculate the how many Swiss Francs per good compared to dollars per good we can get so therefore 2 Swiss Francs per good/$1 per good is the ratio of comparison , hence we treat f(X) as a function of swiss good(s) per U.S good, therefore f(X)= 2 x , knowing that x= 0.2 f(x)= 2(0.2) which will result in f(x)= 0.4.

3 0
3 years ago
Read 2 more answers
An investor owns 200 shares of a stock that has split 2 for 1. The investor will get the additional 200 shares by_______.
Scrat [10]

Answer:

Explanation:

Given information

Number of shares owned = 200 shares

Split ratio = 2 for 1

Number of additional shares = 200 shares

The additional shares would get when the investor received the new certificate which specifies the additional shares plus the old certificate is also with the investor which decreased the par value of each share.  

It is a cheaper method as compare to cancel the shares plus issuing them

6 0
3 years ago
For the purpose of process analysis, which of the following measures would be considered an appropriate flow unit for analyzing
ira [324]

Answer:

a. Sales Dollars

d. number of customers served per day

Explanation:

In process analysis, flow unit can be described as the fundamental unit of analysis in any scenario whatsoever. This can include the customers, phone call, money, goods produced etc. Furthermore, the flow rate is simply the number of flow units. From the example, Sales Dollars and the number of customers served per day are appropriate flow units, while gasoline pumps and employees working are all resources and not flow units.

4 0
3 years ago
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